On February 6, 2009, the State Administration of Radio, Film and Television (“SARFT”) and the Ministry of Commerce (“MOFCOM”) issued a joint decision (SARFT and MOFCOM Order No. 59) abolishing the “Interim Regulations on the Administration of Sino-foreign Joint Ventures and Cooperation in Broadcasting and TV Program Production and Management Enterprises” (“2004 Regulations”). This decision will effectively make it difficult to impossible for foreign companies to establish TV or radio joint ventures with Chinese partners.
In October 2005, SARFT issued the “Circular on Matters Relevant to the Implementation of the 2004 Regulations” (“2005 Circular”). The 2004 Regulations and the 2005 Circular allow foreign investment into broadcasting and TV program production and management enterprises on the condition that foreign partners are professional radio or television companies and the domestic partner is not a radio or television station.
SARFT announced on its Web site that the rationale for abolishing the 2004 Regulations stems from current developments in the broadcasting and television industries that have outpaced the scope of the regulations. SARFT officials disclosed that they are considering the implementation of new rules.
Overview of the 2004 Regulations
The 2004 Regulations formally permitted foreign TV and radio stations, as well as professional film and TV program producers, to set up joint ventures with Chinese domestic professional film and TV program production entities. The equity ratio of the Chinese partner was required to be no less than 51%.
SARFT and MOFCOM were jointly responsible for the examination and approval of the establishment of Sino-foreign jointly operated enterprises, and the provincial administrations of broadcasting and TV programs were responsible for the regular supervision and administration of the Sino-foreign jointly operated enterprises within their jurisdictions.
In addition to the certificate of approval and business license that foreign invested enterprises generally require, investors were required to obtain pre-approval from SARFT. Several noteworthy restrictions included:
- The legal representative of a Sino-foreign operated enterprise must be appointed by the Chinese party.
- The registration capital of a Sino-foreign jointly operated enterprise can be no less than US$2 million (or an equivalent RMB amount); for Sino-foreign jointly operated enterprises engaging exclusively in the production of animated cartoons, the registered capital can be no less than US$1 million. Capital contributed by the foreign party must be provided in cash, while there is no restriction on the form of capital contributed by the Chinese parties.
- All parties to the Sino-foreign jointly operated enterprise must be legal persons. At least one of the Chinese parties must have either a License for Broadcasting and TV Program Production and Management, or a Type-A License for TV Series Production.
- The programs produced by a Sino-foreign jointly operated enterprise are restricted to specific areas such as features, entertainment, and animated cartoons, while news, current events and news-related topics and features are prohibited. The enterprise may produce a TV series only after obtaining a License for TV Series Production.
- At least two-thirds of the Sino-foreign jointly operated enterprise’s annual production of broadcasts and TV programs must feature China.
- A Sino-foreign jointly operated enterprise is prohibited from consigning or leasing its operations to the foreign party, institutions overseas, or other domestic foreign invested enterprises, and may not let the above-mentioned entities conduct contract-based management.